YET ANOTHER UPDATE (5:24 Eastern): Microsoft has confirmed to Kotaku that the "family sharing" and digital cloud library access features that were planned to be in the Xbox One are indeed gone thanks to today's policy reversal. Xbox one users will also apparently have to download a "Day One" patch to enable the offline mode.

FURTHER UPDATE:

"You can play, share, lend, and resell your games exactly as you do today on Xbox 360." That is now the official word from Microsoft.

Microsoft says it "imagined a new set of benefits such as easier roaming, family sharing, and new ways to try and buy games," but that it also realized that "the ability to lend, share, and resell these games at your discretion is of incredible importance to you."

No Internet connection will be required to play offline Xbox One games; the Internet will only be required for a one-time initial system setup. There will be no limitations on sharing or selling game discs. Downloaded games will be playable offline, and there will be no regional restrictions on those games.

On the downside, there will be no digital "family" sharing as was previously announced, and disc-based games will require the disc to be in the tray to be played.

Here is the full text on this change directly from Microsoft:

Last week at E3, the excitement, creativity and future of our industry was on display for a global audience.

For us, the future comes in the form of Xbox One, a system designed to be the best place to play games this year and for many years to come. As is our heritage with Xbox, we designed a system that could take full advantage of advances in technology in order to deliver a breakthrough in game play and entertainment. We imagined a new set of benefits such as easier roaming, family sharing, and new ways to try and buy games. We believe in the benefits of a connected, digital future.

Since unveiling our plans for Xbox One, my team and I have heard directly from many of you, read your comments and listened to your feedback. I would like to take the opportunity today to thank you for your assistance in helping us to reshape the future of Xbox One.

You told us how much you loved the flexibility you have today with games delivered on disc. The ability to lend, share, and resell these games at your discretion is of incredible importance to you. Also important to you is the freedom to play offline, for any length of time, anywhere in the world.

So, today I am announcing the following changes to Xbox One and how you can play, share, lend, and resell your games exactly as you do today on Xbox 360. Here is what that means:

An internet connection will not be required to play offline Xbox One games – After a one-time system set-up with a new Xbox One, you can play any disc based game without ever connecting online again. There is no 24 hour connection requirement and you can take your Xbox One anywhere you want and play your games, just like on Xbox 360.

Trade-in, lend, resell, gift, and rent disc based games just like you do today – There will be no limitations to using and sharing games, it will work just as it does today on Xbox 360.

In addition to buying a disc from a retailer, you can also download games from Xbox Live on day of release. If you choose to download your games, you will be able to play them offline just like you do today. Xbox One games will be playable on any Xbox One console — there will be no regional restrictions.

These changes will impact some of the scenarios we previously announced for Xbox One. The sharing of games will work as it does today, you will simply share the disc. Downloaded titles cannot be shared or resold. Also, similar to today, playing disc based games will require that the disc be in the tray.

We appreciate your passion, support and willingness to challenge the assumptions of digital licensing and connectivity. While we believe that the majority of people will play games online and access the cloud for both games and entertainment, we will give consumers the choice of both physical and digital content. We have listened and we have heard loud and clear from your feedback that you want the best of both worlds.

Thank you again for your candid feedback. Our team remains committed to listening, taking feedback and delivering a great product for you later this year.

Take this with a grain of salt for now, but Giant Bomb news writer Patrick Klepek is reporting that "multiple sources" are telling him that Microsoft will be announcing a complete reversal of its controversial Xbox One game licensing and online policies later today.

According to the report (which is currently killing Giant Bomb's servers), this means the Xbox One will no longer have to check in regularly online but will instead only require an Internet connection during the initial system setup. Game discs will be just as portable as they were on the Xbox 360, with no restrictions on resale or transfer, and downloadable games will work offline as well as online. Region locks on the system will also reportedly be dropped.

A separate report from WhatTheHiFi confirms the essential facts of the Giant Bomb report through its own unnamed sources, adding that developers are being informed of the change before consumers hear about it officially later today.

While neither site gives any more details on where this information is coming from, Klepek says that his sources tell him that Microsoft has definitely been listening closely to consumer feedback in the weeks since first revealing its information.

We're reaching out to our own sources on this and will of course let you know when anything official comes out.

That is a strange strance to take. If the are taking steps to "redeem" themselves, trying to build up that trust by doing what you asked for in the first place, why still refuse? If this happens, MS will jump up several notches on my ladder.

Sounds too good to be true.I actually don't think all of their ideas were terrible, just taken to the extreme. I bet that they are rolling back some of the restrictions but they won't go as far as this article suggests.

Sounds too good to be true.I actually don't think all of their ideas were terrible, just taken to the extreme. I bet that they are rolling back some of the restrictions but they won't go as far as this article suggests.

I don't know whether I should be thanking Sony for unwillingly forcing Microsoft's hand (if true) and backing down from the most customer-hostile policies of any major company this century, or sad that Microsoft is NOT boneheaded enough to stay the course of driving their console business into the ground and exiting the market.

I trust Klepek's reporting and believe that Microsoft is considering major changes, but this sure seems like Microsoft is floating the idea out their first through anonymous sources to see how the concept is received. If Microsoft had indeed actively changed its DRM policy and was planning a full mea culpa, then I'd expect them to shouting it from the top of Mt. Rainier on their own terms rather than leaking info through back channels. I hope I'm wrong, of course.

Microsoft had no choice. Sony utterly gutted them with their announcements. Microsoft will already be having a hard time competing on price because of the Kinect requirement. They had to do something to make their platform compelling. And this was a very big step in the right direction.

Will be watching closely to see if this is really :A) A reversal, orB) "User education", as if "clearing up" their messaging or helping users "understand" how their shit works will reduce outrage.

If it's really so complicated enough that you need "education"-- and I did go to their official documents online and read through them-- it's probably not something that's simple and straightforward enough in the first place.

I just want to know how this will effect the platform as a whole.Namely about disk-less family share and if I now need to keep discs in the system to play a game.Because both of those items(for my situation) were really big bonus, but now looks like those will be dropped features.

Shame because MS could have solved this debacle in a MUCH more elegant way that still preserved their long term DD platform goals.

I would be a little disappointed if they announced a complete reversal. I'd rather they just add the ability to play offline as long as the disc is in the drive. I think that would satisfy a significant number of complainers while keeping those of us who actually like the changes happy.

Microsoft reversing policies doesn't absolve them from being "evil" to consumers... they're still just as "evil" as they were when they announced the policies. They're just responding to market forces that are showing that if they continue down this path, they're going to be in for a big surprise in Q1, 2014, when the number of consoles moved is lower than their estimate.

I wonder how this will affect their online game sharing. If there was anything positive about their connection requirements, it was that it enabled users to share games that aren't on disc a lot more easily.

Of course, that's not a sure thing either. I hope they don't rescind the downloaded games portion of the license, though. Sharing downloaded games was actually quite appealing to me since that's where the industry seems to be going.

Edit: Aaaaand it's gone. That was shortlived. I was actually excited about the implications for download-only games. Being able to play a game without putting the disc in was also a plus, however small. This is what happens when a community riots instead of encouraging reform where it's actually needed.

This will never happen as long as Don Mattrick is still working there.

Hmm.. Linkedin just told me he's updated his profile.

Now all MS has to do to make this a real fight is to drop the other controversial issue of its being a $100 more expensive spy machine (guess that's 2 issues).

they have explicitly said you can turn off all features of the kinectquit spreading BS like an awful politician

Can I NOT have the Kinect? It cries that it's too low on my TV stand, and MS can go F itself if it thinks I like having that rectangular turd on top of my beautiful TV. It's ugly, useless, and makes the system cost $100 more.

Who didn't see this coming? It was always going to be "We listened to the fans and changed our minds" rather than admitting "We listened to our preorders not even meeting our worst expectations and changed our minds."

I think they should keep discs they way the current gen systems work. Put the disc in and you can play without any restrictions. If you want to install the game to the HDD then it's okay to have authentication (ideally one time but I'd even accept regular check-ins). So if you buy the game electronically or install it on the HDD you agree to authenticate. If you don't want to have to do that then buy and play it from the disc. Seems like a reasonable compromise.

Unless you're a console partisan, this would be unqualified welcome news.

Of course, it's still $100 too expensive. I'm guessing this rumor, if true, doesn't include Microsoft reducing the price to $400. Dropping these restrictions may make the Xbox One more appealing to early adopters and even out the rumored disparity in pre-orders versus the PS4 since most of the folks pre-ordering either consoles are likely to be core gamers who were most likely to be aware of and offended by the restrictions. However, it still doesn't address the barrier the $500 price puts up for the larger, less hardcore audience that isn't so game-centric. It's no small irony that a console designed in many ways to appeal to an audience broader than gamers is priced at a level that much of that audience isn't going to bite.

For Sony and their partisans, that $100 price advantage will continue to be the stick to beat Microsoft over the head with. Frankly, it's also the most powerful one as well - most of the general public doesn't know or care about the DRM restrictions but $100 cheaper is something everyone understands.

If they do it; it's because game publishers have told them they're really not interested in restricting used game sales.

IMO the way to do this is to sell the game at full price ($60) for a physical disc, and $50 for a digital copy that is non-transferrable. As time goes on, the price of the digital copy will go down. This accomplishes all of the goals that MS has in creating a "Steam for Consoles" without pissing people off.

They royally fucked up the messaging on this issue; so I think a press release that says "Ok, we goofed, we listened to you and we're rolling back everything" would go a long way towards restoring gamers' trust.

If this means they are talking away the sharing features, I won't be happy. I don't sell games, I don't buy discs, and I would rather MS keep pushing forward.

You don't need 24 hour check ins to enable sharing, you realize.

iOS does perfectly fine without any check ins, so long as the user is authorized; the only check occurs are during install and update, which is apparently reasonable given how many people don't complain.

TLDR; validate the system during setup, create an account to tie to the system, tie software to the account during install, and revalidate that the account is still authorized when the software is updated. Keep sharing across accounts for as many accounts as MS allows.

Kyle Orland / Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in the Washington, DC area.